The law of unintended consequences is alive and well in a strange place: more Americans are going to college, which is a good thing, but it has reduced the quality of officers joining the military.

I saw the importance of having a high-quality officer corps firsthand when I was deployed with an infantry company to Sangin, Afghanistan in 2011. For seven frustrating months, our battalion was stuck in a Groundhog’s day of either finding Improvised Explosive Devices (IEDs) or having the IEDs find us. The only variation was imposed on us by the actions of the other side.

Waiting for the plane home, I joked to another officer, “That was nothing like what the counterinsurgency manual described.”

“I wouldn’t know – I haven’t read it,” he replied. “I don’t need a book to tell me what to do.”

This anecdote of one lieutenant’s antipathy to “book learning” reflects a deeper problem: the decline in the intelligence of military officers, which our recent study found has become significant. This is not just a result of continuing wars in Iraq and Afghanistan, but has been a trend for at least 35 years.

Using data from a Freedom of Information Act request, we found that the average intelligence of Marine Corps officers has dropped since 1980. For example, 41% of new Marine officers in 2014 would not have met the intelligence standards demanded of officers in World War II. This decline is especially surprising because, as others have documented, 2011 saw the most intelligent group of enlistees in the history of the volunteer military. Thus, even as the intelligence of our enlisted troops have been rising, that of our commissioned officers has been declining.

]]>The state of the stock markets in China looks rocky, but China as a market continues to look rock solid for American companies hungry for growth. With its under-tapped middle class – estimated to reach over 850 million by 2030 by some measures — it is hard to imagine how businesses can enjoy long-term global growth without a strategy to crack China. According to the U.S.-China Business Council, China represents, at least, a $300 billion market for American companies. It is no surprise, therefore, that for a staggering 93 percent of businesses surveyed by the Council, China was among the top five priorities – and the very top priority for 22 percent.

That said, few companies have expressed their enthusiasm for China with as much exuberance as Uber, the car hailing app; it is the latest brand to be elevated to verb status, in cities around the world, and, remarkably, even in China. According to a recent email from CEO Travis Kalanick, “China now represents the largest region outside the U.S. and, at the current growth trajectory, will most likely surpass the U.S. before year-end.” According to data in the same email, the Chinese city of Chengdu alone was 479 times as large as New York in terms of Uber trips at the same age of nine months.

While there is disagreement about its numbers — its own estimates of a million rides a day are disputed — what is not in dispute is that Uber may have achieved the seemingly impossible: as a tech company in the business of consumer data collection, it has cracked the Chinese market. In the meantime, the traditional data giants, Facebook, Google, Twitter, Amazon, have been shut out of China or are barely surviving

]]>Americans have well-founded respect for their military officers -- as the backlash against Donald Trump's outlandish statements about John McCain's military service has underscored. So it is upsetting to learn that the U.S. Marine Corps may be suffering some decline in the quality of its officers.

In general, Americans get smarter over time, measured by the rise from one generation to the next in average performance on intelligence tests. This steady trend is called the Flynn effect, after the academic James Flynn whose research has illuminated it. Unfortunately, new research shows a reverse Flynn effect for the officers of the Marine Corps: The average new officer today performs substantially worse on an IQ test than the average new officer did 35 years ago.

Newly commissioned lieutenants in the Marine Corps take a General Classification Test, an intelligence test that has been shown, in studies dating back to its origins during World War II, to be highly correlated with success in the military. Matthew Cancian and Michael Klein of the Fletcher School at Tufts University obtained scores from this test through a Freedom of Information request, and found a troubling decline since 1980.

]]>“Let us put aside what divides us and overcome narrow self-interest in favor of working together for the common well-being of humanity.”

With those inspiring words, UN Secretary General Ban Ki-moon kicked off last week’s Addis Ababa conference on Financing for Development. It was the first of a series of major events that could make 2015 a turning point in sustainable development, the next two being the launch of the Sustainable Development Goals (SDGs) in New York in September, and the Paris conference on climate change in December.

One of the most significant changes since the declaration of the Millennium Development Goals, set to conclude this year, is that the private sector is now seen as a key stakeholder. With governments reneging on prior commitments, and given the projected $3 trillion to $4.5 trillion price tag to achieve the SDGs, corporate participation is essential.

Secretary General Ban’s plea to overcome narrow self-interest may, however, be the wrong signal for businesses responsible for meeting earnings expectations and delivering returns to shareholders. With the majority of growth expected from the developing world, self-interest may be the most compelling reason for businesses to participate in sustainability and inclusive growth.

]]>The intelligence level of Marine Corps officers has shown a steady and significant decline over the past 35 years, a new Brookings Institution study says.

The decline "has not been due to affirmative action policies but rather a broadening of the number of college graduates eligible to enter the officer pool," according to Brookings' nonresident senior fellow Michael W. Klein and former Marine Matthew F. Cancian, a Master's student at Tufts University.

The change is due to the "democratization of college," the authors said in their study, titled “Military Officer Quality in the All-Volunteer Force."

They note that a college degree is required to become an officer, and there is now a "much wider and diverse pool of college graduates for the military to choose from than there was in 1980."

"Although some might argue that the decline has been due to affirmative action and a more diverse applicant pool, the research does not find it had a negative impact on the quality of the officer corps," they said.

]]>US Marine officer candidates are doing worse and worse on an intelligence test that’s been around in some form since World War II, according to a new study of decades’ worth of scores.

After completing Officer Candidate School, Marines about to assume officer duties spend six months at The Basic School in Quantico, Virginia, before taking the General Classification test (GCT).

In a new NBER working paper, researchers at Tufts’ Fletcher School of Diplomacy found the GCT score that would have been the cutoff for the bottom third of new officers now covers the bottom two-thirds. A full 85% of people who took the test in 1980 got a score over 120, which was the cut-off for Marine officers in World War II. Just 59% beat that score in 2014.

]]>Emerging markets—characterized by a rapidly expanding middle class and growing consumer spending, which McKinsey & Company estimates will reach $30 trillion by 2025—present an unprecedented growth opportunity for companies. To successfully expand to these markets, US and European companies must operate differently, and work within landscapes they aren’t accustomed to or designed for. Whether it is contending with a relatively small middle-class population, insufficient infrastructure, or the need to design and deliver products and services in an entirely different way, succeeding in emerging markets requires an expanded and different skillset. It also requires a broader appreciation for and commitment to addressing “contextual gaps” as part of core business strategy.

Addressing these contextual gaps involves taking on two important challenges: maintaining a sustainable supply chain and making business activities more inclusive. The first challenge, sustainability, increases as market opportunities expand. Consider the case of Yum! Brands in China: The popularity of its KFC franchise and the resulting unprecedented rise in demand for poultry stressed Yum!’s supply chain beyond its limits and led to severe quality-control challenges. Suppliers took extraordinary measures to keep up, leading to an antibiotics scare in the local poultry supply chain. This caused a sharp decline in revenues in 2013 and hurt the brand’s reputation.

Where did Yum! go wrong?

The company should have invested more in the institutions and infrastructure needed to support a sustainable approach to expansion; the wider context of the fast-growing, emerging market they were tapping had not kept pace with demand. Ultimately, KFC managers took a long-term view, factored-in the contextual gaps, and developed more sustainable practices by investing in, establishing, and certifying its suppliers, and by letting consumers know about their efforts to ensure the quality and safety of their food.

The second challenge, inclusivity, stems from the limited economic inclusion of market segments—usually those not yet reaching the middle class and offering limited profitability in the near-term. Classic business strategy would dictate that companies focus their resources on the most lucrative markets, and avoid less-profitable or unprofitable segments. However, in emerging markets, companies must weigh the value of focused growth against larger, more-sustained growth driven by an inclusive market strategy. Predicating an emerging market strategy on the middle class alone, without a plan to serve the less-lucrative segments at the bottom of the pyramid can prove an expensive bet. The Swiss food and beverage company Nestle, for example, built its strategy in Africa on serving the growing middle class but grossly over-estimated its size. As a result, the company recently announced a 15 percent reduction of its workforce in 21 African countries and cut its product offering by a half. It will now have to re-calibrate and decide whether to reset its targets in Africa and target lower-income consumers.

]]>In his new book, Superpower, Eurasia Group’s Ian Bremmer suggests three strategic options for America to remain a global superpower. But while many lawmakers appear to be taking his preferred option of an “Independent America” to heart, we believe it’s the wrong choice. In fact, Bremmer leaves out a fourth approach that we feel is the best strategy for America to win not only on the current global chessboard, but on the next one as well.

With the US reluctantly being drawn back into putting out fires in the Middle East, warily watching Russian aggression, facing a stop-and-start “Asia pivot,” and on the sidelines the Greek crisis unfolds or Chinese stock markets go through turmoil, reviewing these options is timely for President Obama; they may be even more important for his successor.

Bremmer outlines three alternatives:

1. Indispensable America: American values must be spread worldwide and the world’s gravest crises must ultimately be dealt with through predominant military power.

2. Moneyball America: The US invests where its commercial interests lie and divests where there are no or diminishing commercial interests

3. Independent America: The US applies its values and creativity to solving problems at home.

While Bremmer—and many lawmakers—have a preference for Independent America, we believe that approach would be the wrong choice in today’s world.

]]>It’s not often that a 40-year-old policy gets overturned, but in recent months, American political leaders have been mulling an end to one: the 70s-era law that prevents American producers from selling crude oil overseas.

One of many “emergency” policy responses to the oil crises of the 1970s, the crude-oil export ban has come under scrutiny in light of the US oil industry’s recent revolution. Not only is the U.S. far less reliant on Gulf oil than it once was, but the shifting logistics of the new North American oil trade have turned the ban into a barrier to the free movement of oil to market.

As some in Congress push the President to lift the ban, he's facing friction from 13 senators in his own party, who sent him a letter two weeks ago urging him strongly to keep it in place. The group includes some prominent voices, including progressive heavyweights Elizabeth Warren and Ed Markey of Massachusetts.

Their letter, full of economic and national security arguments, is instructive—but not in the way the signers intend. The senators offer six reasons for keeping the crude export ban in place, all of them wrong. And a look at their mistakes is an excellent way to appreciate the longstanding misconceptions about economics in general, and oil in particular, that can easily drive errors in energy policy.

]]>Temasek Holdings Pte is shaking up its asset mix with a push into biotechnology and consumer companies that stand to benefit from aging populations and increasing disposable incomes.

Singapore’s state-investment firm singled out life sciences and agriculture as well as consumer goods among the top three industries it allocated money to in the fiscal year ended March 31, helping its portfolio value reach a record. It added assets in U.S. pharmaceutical firm Gilead Sciences Inc, Indian drugmaker Intas Pharmaceuticals Ltd, and health and beauty retailer A.S. Watson during that period.

Temasek is broadening its investments as those holdings will capitalize on the increasing medical needs of aging societies mainly in the developed world and a growing middle class bolstering consumption in emerging markets. The share of life sciences and agriculture in the investment firm’s portfolio tripled in two years to 3 percent and the share of an asset class that includes consumer goods and real estate gained to 15 percent from 11 percent in the period.

“Temasek is quite astute in monitoring and exploiting broad secular trends,” Patrick Schena, co-head of the Fletcher Network for Sovereign Wealth and Global Capital at Tufts University in Medford, Massachusetts, said in an e-mail. These include “demographics, such as aging, and socio-economic transformations, such as expanding middle-income populations.”

]]>In 2007, the U.S. Federal Communications Commission (FCC) fined three mobile phone operators for failing to ensure that first responders could locate their customers if those customers were to dial 911 during an emergency. The nationwide initiative to get telecommunications companies to invest in location technologies has been difficult: each company wanted the other parties—including public safety agencies—to invest before it would make its own move. As a result, everyone held off complying with the 2005 FCC mandate.

Even back then, it was odd that the telecommunications sector was so reluctant to embrace location technology. Getting public safety communications right after 9/11 was paramount, and high-tech analysts had been hyping location-based services for years. Marketing gurus extolled the virtues of the “segment of one,” a concept that allowed for individualized selling through the fine parsing of consumer data. The 2002 movie Minority Report offered a stunning, dystopian visualization of this data-drenched future. Shops would be able to customize their commerce at the simple scan of a retina. In the film, personalized greetings and troves of personalized products soon followed. For all of this to be realized, of course, an entire location-cum-personal-data–aware ecosystem needed to be set up—and the mobile phone operators were not ready to invest in their piece without the rest of the puzzle close to being completed.

Although not a perfect facsimile for Minority Report’s smart retina system, today’s devices are within striking distance of it. Mobile apps and websites can find users food, companionship, and the nearest gas station—all based on who is using them, the user’s past behaviors, and the precise location. Today, “Uber” is as much a verb as it is a company—one that can dispatch a car to its users at the tap of a screen and possibly do so faster than calling 911 could summon an ambulance just a few years ago. Thanks to advances in technology, we are locatable almost anywhere, and our personal and professional lives are connected in an ever-growing digital mesh. Houses can be seen from a distance. Organizations can monitor the activities of their employees. Family members can keep track of one another. Smart homes can monitor supplies (and even order household staples at the push of a button), measure the use of utilities, monitor people on the premises, and even have their thermostats set from anywhere in the world. These technologies are not limited to the developed world, either. In disaster zones, such as post-earthquake Nepal, several crisis-response platforms cropped up that create maps based on user inputs.

]]>The recent green light in Congress for fast-tracking the Trans-Pacific Partnership marks an opportunity to put a forgotten economic heavyweight back in focus. As the world’s third-largest economy, Japan is a key partner in a trade deal accounting for 36.3 percent of global GDP and 31.9 percent of global trade, with a potential multiplier effect across the partnership and beyond; the more vibrant Japan is, the bigger the multiplier.

Unfortunately Japan appears to have lost its capacity to innovate and grow in recent years. In fact, it is easy to write off Japan, were it not for signs suggesting that would be premature; consider the Thomson Reuters Top 100 Global Innovators picked each year based on four solidly quantifiable criteria. The country that bags the prize for the most companies on the list is, indeed, the one you may have been tempted to write off. With 39 companies out of the top 100, Japan beat the United States for the top spot.

American consumers who are old enough will have wistful memories of Japan’s high tech and highly functional creativity. Think of the Sony Walkman, Super Mario Bros, Toto toilets, or, even, instant Ramen. All that seems like a distant memory. Post-Trans-Pacific Partnership, it is natural to ask: is Japan ready to get back in the limelight? Why haven’t its 39 innovative companies re-established Japan’s vibrancy? Where might it be going wrong? A combination of structural factors might explain the Japanese puzzle.

]]>The real problem for Greece isn’t economic principles or policies, nor the Germans’ disregard for Greek democracy and their fetish for “austerity.” It’s the malfunctioning machinery of the Greek government.

Greece has the trappings of an advanced Western economy, but its government’s capacity to tax and spend seems distinctly Third World. The proportion of self-employed Greeks is more than twice as high as in the rest of Europe. And as everywhere, self-employment provides more opportunities for tax fiddling than does earning a salary; indeed the ease of tax evasion rather than the glamor of entrepreneurship is what draws many to self-employment.

It isn’t just the small shopkeepers or taxi drivers who cheat: according to a University of Chicago working paper, the “primary tax-evading industries (sic) are medicine, law, engineering, education, and media.” The true income of the self-employed in Greece, the authors estimate, is about 1.8 times their reported incomes, with lost tax revenues amounting to more than a third of the government’s budget deficit.

]]>The financial crisis unfolding in Greece is unprecedented, and few experts are prepared to speculate on just what might happen next now that the country has defaulted on one of its many sizeable debts...

...Greece missed the Tuesday deadline to make a 1.55 billion euro payment on its debt to the International Monetary Fund, and is now officially in arrears.

Greece pitched a two-year deal to restructure its debt just hours before the Tuesday deadline. However, German Chancellor Angela Merkel seemed to throw cold water on the idea, saying there would be no further negotiations with Greece until after Sunday's referendum, in which Greeks will decide whether they want to accept their creditors' bailout conditions or exit the eurozone.

"It's just incredibly fluid," said Michael Klein, an economist at Tufts University who has worked at the U.S. Treasury Department...

..."Imagine if you all of a sudden were limited to taking $67 US out of the bank each day, and just think about the bills you get in your mail, and you're just unable to pay them," said Klein.

"So, even if people have stashed away a lot of money, which is likely, people want to hoard their money in times of great uncertainty like this … It's just going to be a terrible situation."

Klein suggests that Greece might bring in a temporary currency, which would in turn create a black market for the euro. But he added that whatever happens, it's all uncharted territory.

]]>When a nation is fast running out of cash, it often tries to stop the hemorrhaging by clamping down on how much money can leave its borders.

Unfortunately for Greece, history suggests it hardly ever works. The country, teetering on the edge of economic ruin after refusing the demands of its creditors and euro-area officials on a debt agreement, joined on Monday a long list of embattled governments that turned to capital controls.

While dozens of countries from Mexico to Iceland and Thailand have imposed such measures since World War I to boost revenue, prop up currencies and hold down interest rates, the International Monetary Fund found that only those few with sound economies and strong institutions succeeded in slowing capital flight. That poses a challenge for Greece, which is facing a default and an exit from the 19-nation currency bloc after aid talks with creditors broke down and the European Central Bank froze its financial safety net for lenders.

“With Greece, a lot of money has already left the country and they’re sort of shutting the gate after the horse has left the barn,” Michael Klein, a professor of international economic affairs at Tufts University’s Fletcher School, said from Dallas prior to Greece’s announcement. With countries in crisis, “there are issues of how effective they can be.”

]]>Soon after graduating from the Master of Arts in Humanitarian Assistance joint program at the Friedman School and the Fletcher School in 2006, Linda Cole set out to start her own relief agency in Uganda. She knew that she wanted it to be an organization to help women in Africa affected, or more typically, devastated, by war. She also knew what she didn’t want it to be.

“We had to make sure we wouldn’t make their situation worse,” she says.

There would seem to be little danger of that, what with many of the women she was targeting uprooted by conflict and struggling to survive. And yet, during her many years working for development organizations throughout Africa, she had seen one program start a clinic just for rape victims and one that gave out yellow water basins to HIV-positive women. Going to the clinic or carrying a basin was as good as guaranteeing the women would be shunned by their communities.

]]>From power stations to factories, thermostats to smartphones, information to entertainment, the world is driven—and controlled—by digital technology. So it’s no surprise that political and economic success, for businesses and nations, depends on how current they are with advances in technology.

That’s why Bhaskar Chakravorti and colleagues at the Fletcher School have created the Digital Evolution Index, a first-of-its-kind map of how, where and at what speed the use of digital technologies is spreading across the globe.

“The transformation from the physical world to the digital world is a profound change that we’re all experiencing at every stratum of society in every part of the world,” says Chakravorti, senior associate dean of international business and finance at the Fletcher School and executive director of Fletcher’s Institute for Business in the Global Context. “And many places are not converting to this new world fast enough, which can limit a country’s ability to compete economically and to efficiently govern its people. This affects their position and well-being in the world community.”

]]>Consider a question that we have been puzzling over at the World Economic Forum. How do you measure which countries or companies are the most innovative? One measure that many chief executives and investors like is the New Product Vitality Index (NPVI), an index associated with 3M, a company widely celebrated for its innovation. It is calculated as sales from products introduced within five years as a percentage of total sales; as a metric it is intuitive and actionable. 3M’s NPVI went from 25 percent in 2008 to 33 percent in 2012, with a goal of 40 percent by 2017.

Now consider another puzzle concerning Google, also widely considered among the world’s most innovative; it is No. 2 on BCG’s 2014 list and No. 4 on Fast Company’s and likely in the top five of the five random people one stops in the hallway. How would Google rate on 3M’s index? Very poorly, it would seem. In 2004, 99 percent of Google’s revenues were from its core product: advertising. Since then the best it has managed to do is to get that number down to 90 percent in 2014.

As you factor in spending, the picture for Google darkens further. Whereas 3M spent only under 6 percent of revenues on research and development, Google spent 15 percent last year. (That other poster child for innovation, Apple, spent only 3 percent.) And for all this money, Google, fails many times over – and is celebrated for it.

]]>Narendra Modi has a fondness for the word “inclusive”. Rarely has there been a landmark occasion in the prime minister’s first year that the magic word has not made an appearance. Ironically, prior to his election, this was not a man most associated with inclusiveness. Much of the concern that swirled around him had to do with his exclusionary record — ranging from the status of minorities in Gujarat to his autocratic governance style.

Modi was elected on a platform of getting the economy going again and yet, over this past year, his rhetoric has invoked more inclusive growth than fast growth. “My philosophy, the philosophy of my party and the philosophy also of my government is, what I call ‘sabka saath, sabka vikas’… the impulse of that particular motto is to take everybody together and move towards inclusive growth,” he said to Time magazine. The major domestic policy offerings in the year gone by, from the budget to the formation of Niti Aayog, the announcements of big initiatives such as the smart cities project or Jan Dhan Yojana, were all lit by the soft glow of inclusion. Even foreign policy has been graced by it. Modi in Japan offered: “We will explore how Japan can associate itself productively with my vision of inclusive development in India,” whereas in Germany, he said: “Our focus is not merely economic growth but an inclusive development.”

Since the frequent repetition of “inclusive” is so integral to Modi’s mantra, it is natural to ask how frequently it is repeated in Modi’s action. If this first year is any indication, India is unlikely to rocket up the inclusiveness index in coming years. Indicators point towards an administration that will prioritise near-term fast growth over the slow and often painful process of inclusive growth. Inclusive growth is not just an outcome measured by a simple GDP growth rate; it is a process that calls for wide participation and equitable sharing in the benefits of growth. There is a tradeoff to be made if there is an urgency to jumpstart a stalling economy. The experience of fast-growing economies is one of exclusionary growth: scarce resources have to be focused in certain sectors, regions and parts of the population with the greatest potential. The Modi record on inclusion can be evaluated along three dimensions.

]]>Reality has not been kind to the climate-change agenda. Despite constant predictions of catastrophic global warming, the Earth’s temperature has remained flat for the past 15 years. Perhaps we should take a step back and rethink the climate issue. Here are some factors to consider.

First, climate activists, including President Obama, now erroneously call carbon dioxide (CO2) a “pollutant,” akin to poisons like lead and mercury. Atmospheric CO2 concentrations have risen from about 280 parts per million to roughly 400 ppm over the past century. The air we exhale contains 40,000 ppm of CO2. Greenhouses routinely set carbon dioxide levels at 1,000-1,500 ppm to boost photosynthesis and grow crops faster. A better term for carbon dioxide is “plant food.”

Second, we need to think about climate variations over thousands or millions of years, not just the past few decades. The modern geological era, known as the Cenozoic, started 65 million years ago. This period, only about 1.5 percent of the Earth’s history, has seen life flourish with atmospheric carbon dioxide levels of up to 2,000 ppm and temperatures much higher than they are today. The greenhouse effect of high CO2 levels cannot explain this warming. The Earth has also seen multiple ice ages, the most recent ending about 20,000 years ago. As ice-age glaciers melted, sea levels have risen by more than 300 feet. Recent changes in temperature, CO2 concentration and sea level are very small on a geological time scale.

Like President Obama's legacy-defining legislation, the Affordable Care Act, the Trans-Pacific Partnership (TPP) is a bafflingly complex bill that is bouncing between life and death on Capitol Hill. Once again, the president has failed to sell Congress, including members of his own party, and the public on a landmark piece of legislation.

Understandably, because of his dwindling time in office, the president is in a hurry to close on a "fast track" version of the deal, but he may want to take his foot off of the gas. In order to move past the political gridlock and irrelevant policy minutiae, and instead, focus on realizing the global potential of the TPP, there are six essential truths he and others should keep in mind before attempting to rush through the process:

This trade deal is about more than just trade. Many industries will directly experience significant change as tariffs and barriers fall. Tariffs are already low for the key countries involved. However, the TPP aims to set sustainability, fairness and inclusion standards across disparate economies beyond just an agreement to lower tariffs and trade barriers. This is why a fast-track passage for the bill is not prudent or straightforward. This complicated deal will have trade-offs that must be addressed holistically, with input from many different industry groups, in order to be evaluated and modified properly. Instead of blindly fast-tracking the bill in its current state, the president ought to make time and open the books on the deal to enable an objective evidence-based evaluation of the trade-offs...

]]>Some policymakers and pundits have argued that currency manipulation–the effort to keep exports cheap by intervening in the foreign exchange market–is the most important issue international economic policy could address. Friday evening, the Senate rejected an amendment by Sens. Rob Portman (R., Ohio) and Debbie Stabenow (D., Mich.) that would have punished currency manipulators. The White House has responded to pressure from Congress, signaling a willingness to bring exchange-rate provisions into trade negotiations, but does not want binding sanctions against currency manipulators to be part of the Pacific trade agreement under consideration.

Currency manipulation is not like pornography–you don’t know it when you think you see it. It’s hard to define and even harder to prove. At one level, any country that has a fixed exchange rate–such as France, Germany, Greece, and China–is, by definition, a currency manipulator. The question is whether a country has kept its currency artificially cheap to boost exports.

The elephant–and tiger–in the room is China, even though China is not one of the countries in the proposed Trans-Pacific Partnership. Advocates of a currency manipulation mechanism call the yuan as Exhibit A. Examining this evidence is instructive, but perhaps not in the way expected by those pushing for a currency manipulation clause in TPP.

]]>We learned this week that, for the first time since 2010, the economies of Germany, France, Italy, and Spain all had a quarter of economic growth. Long-beleaguered Spain led this foursome, growing at a 0.9% rate in the first three months of 2015.

Some will attribute this performance to the success of austerity programs that began five years ago. Outside the eurozone, the conservative victory in Britain’s elections last week was treated by Prime Minister David Cameron as vindication of his austerity program. But the facts cast doubt on these claims.

Austerity is a hard-earned lesson–one worth the pain only if its correct. Shredding the social safety net during a recession causes widespread pain, especially among the poor and those who had reached the middle class. This tough medicine could be merited if it produced a quicker turnaround to economic health. But after a prolonged period of economic weakness, the eurozone as a whole has not yet attained its pre-crisis level of gross domestic product. Austerity did not deliver the promised turnaround in Spain and Italy, and it continues to hamstring growth elsewhere in the eurozone.

]]>The country should rank higher in the global Digital Evolution Index (DEI), not just on the verge of the high-potential, “break-out” category alongside China, Malaysia, Thailand, and Vietnam, according to the Philippine Long Distance Telephone Co. (PLDT).

Aided by Mastercard and DataCash, US-based Fletcher School at Tufts University created the Index for the digital economy of 50 countries selected based on the location’s Internet usage from 2008 to 2013.

The index was derived from four drivers: Supply-side factors – access, fulfillment, and transactions infrastructure as well as demand-side factors – consumer behaviors and trends, financial and Internet and social media savviness.

In his years-long effort to advance a massive new trade deal, President Obama weathered a major setback Tuesday from an unlikely source: his fellow Democrats.

While Senate Republicans largely rallied around a vote to consider the so-called fast-track trade bill, which would strengthen Obama’s authority to complete the Trans-Pacific Partnership, all but one Senate Democrat voted to block it.

… But Bhaskar Chakravorti, the founding executive director of Tufts University’s Fletcher’s Institute for Business in the Global Context, warned that it’s not that simple. New measures can’t simply be added overnight to the draft trade deal, which currently encompasses the U.S. and 11 other countries, including Japan, Australia, Vietnam and Chile and would govern 40% of the world’s Gross Domestic Product. U.S. negotiators will have to take each change back into multiple rounds of discussion with all 11 partner countries, all of which are at different stages of development and have different things to gain from the pact, Chakravorti said.

]]>At our Inclusion Inc. conference at The Fletcher School, there was a fascinating conversation between Tim Cross, President of YouthBuild International, and two of YouthBuild's corporate partners, Lata Reddy, President of The Prudential Foundation and Dina Silver Pokedoff, Senior Manager of Branding for the Saint-Gobain Corporation. What I particularly enjoyed about the discussion was that it offered a close-up look at a single NGO's experience with multiple corporate partners, representing industries as different as insurance and building materials. It provided insights into what it takes to get a partnership started with two very different kinds of entities, and, more critically, what it takes to ensure that the partnerships endure.

More broadly, there are several patterns that are useful for understanding the overall context for such partnerships. Corporations and NGOs are very different in their goals, organization structure, motivating factors and culture. They enter into relationships with each other with differing objectives. As these relationships have matured, both types of entities are getting somewhat less wary of the other. They are also beginning to invest in fewer partnerships and focusing on more "strategic" relationships. However, there are still many bumps on the road ahead.

Consider the question of differing motivations. According to the Corporate-NGO Partnerships Barometer, the primary motivation for a corporation to enter such a partnership is to enhance brand, corporate reputation and credibility; in parallel, according to the same Corporate-NGO Partnerships Barometer, an NGO enters such a partnership primarily to access funds. It is particularly telling that long-term stability and impact are the second most important motivation for both parties. This suggests that each has an incentive to build towards a longer-term relationship...

]]>Commenting on the state of innovativeness, Peter Thiel, founder of PayPal and legendary Silicon Valley investor, remarked, "We asked for flying cars. Instead, we got a hundred and forty characters."

Really, Peter? Who asked for flying cars?

Silicon Valley is, of course, obsessed with cars of many kinds -- self-driven, electric, enabled by commands and software downloads from a mobile phone. The urge to be airborne has been channeled primarily into recreational UAVs, or drones, thankfully. Given that so much of Silicon Valley travels in company buses (arguably, a more efficient and greener mode of transport than any of these alternatives) I am a bit alarmed at the prospect of a proliferation of new car options, of either the self-driven or the flying kind. Is there an urgent need for either?

Speaking of urgent need, let's talk about flying toilets. As more of the world's population migrates from rural to urban areas, living conditions are getting more congested around the world. In few places is the congestion as bad as it is in Kibera, East Africa's largest informal settlement. There is no space for 20th century sanitation systems in Kibera and its residents do not use toilets. So, Kibera's residents use plastic bags to "do their business" and dispose of it by tossing them - the flying toilet. Quite apart from the indignity and inequity in a world where indoor plumbing and toilets have made their way into everyday existence of residents of the industrialized world by the early 20th century, the flying toilet is a potent carrier of disease. Displacing this status quo with an alternative that works is a challenge for any innovator interested in solving a hard problem. It is hard to question the urgency of the need in this case…

]]>The founder of modern Singapore, Lee Kwan Yew, who passed away recently, had a rather pointed assessment of what’s known as the U.S. “Asia pivot” policy: Americans think of international relations like a movie, imagining that we can hit the pause button when we need to and then push play when we want to return. No doubt, there has been much for the U.S. to focus on elsewhere in the world recently, from Russia to Iran. But in past weeks, it seems that the movie in Asia has been on fast-forward around global development and financing. And once again, the U.S. is scrambling to catch up.

Here is a brief synopsis of what we missed: Under Chinese stewardship, a new and potentially disruptive player in the development banking landscape, the Asian Infrastructure Investment Bank (AIIB), which was initially proposed in 2013 by President Xi Jingping, gathered steam. It’s stated mission is to “focus on the development of infrastructure and other productive sectors in Asia.” It has attracted 57 founding member countries. This group includes some of America’s closest allies – first the UK, followed by Germany, France, South Korea, and Israel, among others. The U.S. and Japan are two of the most prominent players to decline membership.

The AIIB has working capital of $50 billion with potential to go as high as $100 billion – so it is, as yet, smaller than the U.S.-led World Bank ($2223.2 billion of subscribed capital) or the Asian Development Bank ($162.8 billion of subscribed capital). But with so many major countries on board, the AIIB poses a credible alternative to incumbent development banking systems like the World Bank, International Monetary Fund, and others that have been in place, largely unchallenged, for 70 years. It’s a big shake-up for the development world…

]]>Saudi airstrikes in Yemen. An incoherent war on the Islamic State. A chill wind blowing away trace memories of an Arab Spring. And now, a framework nuclear agreement with Iran.

A region that can simultaneously set the direction of the global economy, global politics and global climate has rarely seemed as full of contradiction: breakthrough is juxtaposed with impasse, conflict and failure. Of course, aside from the historical and geopolitical significance of the Middle East, the key link between the region and the world is through its sway over oil supplies. Yet, oil markets have been notably muted in their reactions to the turbulence of the region. Even when prices spiked on concerns that shipments through the Bab-el-Mandeb Strait would be disrupted by the Yemeni crisis, the progression of the nuclear deal with Iran acted to send them back down. What is going on? Is the Middle East’s outsized influence on oil a thing of the past? Can we bank on cheap oil forever? Does the prospect of an agreement with Iran ensure that oil prices will fall further, making the region’s uncertainties irrelevant? Prepare to be surprised.

As with any market, uncertainties lurk on both the demand and the supply sides. The issues on the demand side of the oil markets are mostly outside the region: the future trajectory of the Chinese economy, international agreements over reductions of greenhouse gas emissions, the value of the dollar etc. On the supply side, in the old days, the oil producers presented a faithful facsimile of the prisoner’s dilemma game: a mutually destructive outcome of price wars among competing commodity producers being held in check by an inherently shaky cartel, with eight out of 12 current members from the Middle East. In the past year, the game has changed in dramatic ways. There are at least three parallel game boards perched on the global oil platform. The independent uncertainties on each game board compound the uncertainty for oil prices overall…

]]>This past week we hosted a two-day conference, Inclusion Inc., at The Fletcher School, where we tested the idea that "the only competitive business is an inclusive business."

Inclusive business, or business that pursues opportunities in traditionally unattractive market segments, ought to be a strategic imperative for corporations and investors. Foregoing such segments would open the door to disruption - because of low-cost entrants or political insurgencies - and shut off options for future growth.

Now, here is the rub: in addition to the long-term and uncertain nature of its returns, inclusive business may also face several unintended and problematic consequences.

Our conference was bookended by two keynotes, one by Unilever CEO Paul Polman and the other from SKS Microfinance founder Vikram Akula; both are inspirational inclusionistas. One runs an inclusive business spanning 190 countries and the other built the largest for-profit microfinance institution in the world from the bottom up.

Both had to contend with the short-term demands placed on publicly-held companies. And both encountered one of the five most significant unintended consequences of inclusive business:

Pressures of public market expectations: The first unintended consequence of inclusive business has its origins in an organizational contradiction: key stakeholders - shareholders, market analysts, and even line managers whose compensation is tied to quarterly targets and stock performance - may not support a corporate decision to be inclusive.

Unilever's Polman got rid of the quarterly reporting cycle at his company and placed his bets on growth in the emerging markets, with inclusive and sustainable strategies. But these choices have not made many prominent shareholders very happy. They have been quite vocal with their complaints about Unilever's sales falling below expectations.

Akula's problem was a different one. The SKS Microfinance sales team found itself competing against other microfinance lenders, and, as a result, fueling an over-indebtedness crisis in the state of Andhra Pradesh in India...

]]>This week we hosted a two-day conference, Inclusion Inc., at The Fletcher School, where we tested the idea that “the only competitive business is an inclusive business.”

Inclusive business, or business that pursues opportunities in traditionally unattractive market segments, ought to be a strategic imperative for corporations and investors. Foregoing such segments would open the door to disruption – because of low-cost entrants or political insurgencies – and shut off options for future growth.

Now, here is the rub: in addition to the long-term and uncertain nature of its returns, inclusive business may also face several unintended and problematic consequences.

Our conference was bookended by two keynotes, one by Unilever CEO Paul Polman and the other from SKS Microfinance founder Vikram Akula; both are inspirational inclusionistas. One runs an inclusive business spanning 190 countries and the other built the largest for-profit microfinance institution in the world from the bottom up.

Both had to contend with the short-term demands placed on publicly-held companies. And both encountered one of the five most significant unintended consequences of inclusive business:

Pressures of public market expectations: The first unintended consequence of inclusive business has its origins in an organizational contradiction: key stakeholders – shareholders, market analysts, and even line managers whose compensation is tied to quarterly targets and stock performance – may not support a corporate decision to be inclusive.

Unilever’s Polman got rid of the quarterly reporting cycle at his company and placed his bets on growth in the emerging markets, with inclusive and sustainable strategies. But these choices have not made many prominent shareholders very happy. They have been quite vocal with their complaints about Unilever’s sales falling below expectations.

Akula’s problem was a different one. The SKS Microfinance sales team found itself competing against other microfinance lenders, and, as a result, fueling an over-indebtedness crisis in the state of Andhra Pradesh in India...

]]>Amanda Judge is the founder and CEO of Faire Collection, a fair trade accessories brand that brings economic stability to more than 200 rural artisans in Ecuador and Vietnam. In the seven years since its founding, Faire Collection has grown from just $10,000 in start-up capital to well over $1 million in sales revenue and is committed to providing its artisans with dignified wages and holistic social programs that provide a path out of poverty. She is the recipient of the 2015 Fletcher Women’s Leadership Award. Judge holds a MALD from the Fletcher School and a degree in finance from Santa Clara University.

The Fletcher Forum staff sat down with Amanda Judge to discuss Faire Collection, the challenges of creating a fair trade business, and opportunities for women’s empowerment.

FLETCHER FORUM: The idea for Faire Collection grew out of interviews you conducted with Ecuadorian women about poverty reduction strategies for your Fletcher thesis. What made you focus on women?

JUDGE: It was actually a bit accidental. The thesis wasn’t supposed to be about women specifically, but about what poverty reduction strategies would work in rural communities. The men were working in carpentry and other industries, while the women’s income stream was mainly from artisan work. Since I had been making jewelry from a young age, I felt this was an area in which I could provide advice, and what I found was striking. The artisans were actually losing money on some of the products they were making, and they didn’t realize it. So I thought—“ you need to do something about this”—and that’s why I ended up focusing on the women in the household…

]]>Back in 2013, market research firm eMarketer was already predicting that Asia-Pacific would soon overtake the United States for online e-commerce sales and become the world's number one market for B2C sales. The region was even expected to account for around 40% of total worldwide B2C e-commerce sales by 2016. There is little doubt that the Internet and progress in information and communication technology are shaping economies and re-shuffling the cards.

Now a team of faculty and researchers at the Fletcher School (Tufts University) in the United States have created the Digital Evolution Index (DEI) to identify how a group of countries compare with each other in terms of their readiness for a digital economy, based on four broad drivers: supply-side factors(including access to the Internet, fulfilment, and transactions infrastructure); demand-side factors(including consumer behaviours and trends, financial and Internet and social media savviness);innovations (including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a startup culture and mindset); and institutions(including government effectiveness and its role in supporting innovation in business, legislation and regulation and promoting the digital ecosystem).

Based on their analysis they have drawn up a ranking for Digital Evolution in the 50 countries studied. It will come as no surprise to learn that the developed economies in the West and Asia are out in front. At the top we find Sweden, the UK, Hong Kong and South Korea. The speed of their digital evolution between 2008 and 2013 is indeed remarkable. But there are also some other interesting trends…

]]>In the coming decades, the majority of the world's economic output and market growth will come from the emerging markets. Already, the seven largest emerging markets collectively contribute more to global output than do the G7 countries combined. That said, once one gets beneath the aggregate statistics, these emerging -- and dynamic -- markets are rife with inequities, bottlenecks and missing institutions.

The societies in each of the emerging markets face many economic challenges -- most of which have to do with the potential for fast growth being undermined by a lack of inclusive growth. This is a tension that global companies cannot ignore as they look to the emerging markets as the primary sources of growth in the coming years.

Under-investment in inclusive growth can pose a challenge to growth itself. The majority of citizens of the newly developing economic powerhouses do not have access to products and basic services we would take for granted in the industrialized world.

Consider some examples: more Indians have access to mobile phones than to toilets; Brazilians live in a country with an abundance of fresh water sources and yet many contend with crippling shortages; and only 20 percent of Indonesians have access to a bank account...

]]>Today, there are as many mobile phone subscriptions as people in the world, and close to 40 percent of the planet has Internet access. Digital connectivity is thus the defining force of our age: It fosters a more engaged civil society; gives consumers access to real-time information and a greater variety of products; opens opportunities for businesses to understand their markets, innovate, and compete; and streamlines government services and promotes transparency. The data on digital connectivity speak to its power and future economic potential. By 2016, the Internet economy in the G-20 nations will increase to $4.2 trillion, up from $2.3 trillion in 2010, according to Boston Consulting Group. If it were its own national economy, the Internet would be the fifth largest in the world. In developing countries, every ten percentage-point increase in Internet speed yields 1.3 percentage points in economic growth, according to the World Bank. In Africa alone, the Internet is slated to transform a number of sectors, such as agriculture and healthcare, and could account for $300 billion of the continent’s GDP by 2025.

The innovation driving that growth is now no longer limited to Silicon Valley. Atomico, an international investment firm, tracked 156 software companies founded in 2003 that are now valued at one billion dollars or more—what is considered a mark of start-up success. Over 50 percent of the 22 e-commerce companies on the list are in Asia. Two of the only three European e-commerce companies are based in Germany. One of them, the Berlin-based Rocket Internet, caters only minimally to consumers in Germany or the West. Its more significant operations are in incubating e-commerce companies in the developing world. It has a presence in over 100 countries and a formidable footprint in the nascent digital economies of Africa. In India, nearly 200 digital commerce start-ups are flush with private equity and venture capital funding. The country holds the dubious distinction, according to a recent UN study, of having greater cell phone accessibility than toilets.

And tiny Estonia has set a gold standard—it has reached “digital nirvana,” if you will—in its electronic enhancement of government and business functions, as well as democracy. Estonians enjoy roughly 4,000 digitized services—from banking to accessing medical records and obtaining fishing licenses. About 98 percent of Estonians pay income taxes online and a third even use the Internet to cast their ballots during an election. The government itself utilizes an e-Cabinet system, which enables ministers to conduct meetings, sign-off on decisions, and write policy—all online. This digitization is incredibly efficient—saving ministers up to 30 hours a week of work. Similarly, entrepreneurs use a unique e-Business Register that allows them to enroll their new company, view annual reports, monitor key data, send inquiries, and conduct background checks on partners. Much of this digital push was led by the government, which had the foresight to innovate in a country that had begun its post-Soviet independent rule with large institutional voids…

]]>In an age where nearly every industry is being disrupted by the Internet, the world’s established political order faces a disruptor like no other: the former Al Qaeda in Iraq, now re-packaged as the Islamic State or ISIS. While the terrorist organization’s ambiguous branding — IS, ISIS, ISIL, Daesh – lends an edge to its sinister identity and goals, its journey to notoriety seems to have followed the path of other disruptors.

Most plans offered today to counter and combat this group focus exclusively on military or geopolitical solutions. While important, these plans lack a key understanding of the other forces that contributed to ISIS’s rise: a strategy for scaling-up an entrepreneurial niche venture along with a sophisticated branding and digital marketing campaign. To sufficiently combat ISIS, the U.S. and the rest of the world must fully understand the branding, digital marketing and start-up mentality that facilitated the spread of ISIS’s influence across the globe.

ISIS’s rapid ascent can be attributed to three factors: First, the group found a market niche ignored by the incumbent players: Al Qaeda HQ, the Maliki administration in Iraq and by the brutal Assad administration in Syria and even the U.S. The door was open for a digitally adept entrant to scale-up from an early toehold. It was willing to go to extremely violent lengths to differentiate itself. It also manipulated technology to build an outsized global brand in the quest to expand its reach across the Internet…

Read the full op-ed ]]>Norway's sovereign wealth fund, the country's collective bank account now valued at $1 trillion and built from off-shore oil reserves, is often held up as a prime example of how such funds can succeed.

The usual rule: make prudent investments, stick to them, be transparent and watch the money grow exponentially. But Norway's Government Pension Fund, as it is formally called, is only one of an estimated 80 or so sovereign wealth funds worldwide that collectively hold $7 trillion US…

… Beyond size, though, there are other measures of success for sovereign wealth funds, says Pat Schena, an adjunct professor of international business at the Fletcher School at Tufts University in Massachusetts.

"Another measure might be in the quality of the management of the fund," he says, pointing to funds in Australia and New Zealand, and to some degree, he says, AIMCo, which manages the Alberta fund. "People view them … very positively because of their transparency and good governance."…

]]>The French tax authorities, striving to combat fraud, keep replaying the hall-of-mirrors scene from Orson Welles’ 1947 film The Lady from Shanghai where the jealous husband’s shots keep hitting the lady’s reflection in the mirrors, and eventually she escapes.

It will be the same for the investigation into HSBC’s Swiss subsidiary, HSBC Private Bank (Suisse), after a whistle-blower, computer engineer Hervé Falciani, leaked data on 106,000 accounts for 2005-07, including files that reveal the comments of the relationship managers who look after private clients.

We know about this because the International Consortium of Investigative Journalists mobilised 154 journalists from 60 media outlets in 47 countries to pick over the data.

The client lists given to France’s finance ministry in 2009, and later passed on to a number of foreign governments, name industrialists, politicians, monarchs (including the kings of Morocco and Jordan), entertainers and sportspeople, arms and drugs dealers, and a few financiers suspected of terrorist links.

This op-ed is reprinted from Le Monde Diplomatique.
(Subscription required) ]]>Intel Microelectronics (Thailand), the local arm of processor maker Intel Corporation, is embarking on a digitally driven business strategy to capitalise on emerging opportunities arising from the government's digital economy scheme.

The next-generation computer processor is an area to be further developed by the world's largest semiconductor producer in order to accommodate the proliferation of mobile devices, said country manager Sontiya Nujeenseng. "The digital economy policy will be the key factor driving ICT spending growth within two years," he said.

Mr Sontiya said [The Digital Evolution Index, prepared by the Institute for Business in the Global Context at] The Fletcher School at Tufts University in the United States considered China, Malaysia and Thailand as the three fastest-moving digital economies in the world thanks to the very rapid penetration of the internet and smartphones…

]]>Now that the much-anticipated budget is out, the big picture is clear: Finance Minister Arun Jaitley has leaned in favour of growth, business-friendliness, making #MakeinIndia more than just a hashtag. An additional $11 billion is to be spent on infrastructure, along with some nods to inclusion. This plan is no gamechanger, but the elephant has been cleared for take-off. Of course, in the coming days and weeks, the nattering nabobs on noisy news channels will work their way through the finer print and find points to quarrel over. Away from the fray, from frigid Boston, I have been following the ever-warming narrative developing around India over the past months with interest. Jaitley and his team get high marks for a plan that keeps that narrative intact. There is just about something for everybody in the budget, not only for most of the stakeholders within the country, but for those abroad who seem to have homed in on India as the global economy’s Great Brown Hope.

ersonally, I have been a bit taken aback at how quickly the narrative on India has turned around, from only recently being castigated as one of the “fragile five” countries, along with headlines on rape, corruption and lost competitiveness in key industries. While the Narendra Modi government has played its cards cautiously in its first year, the turnaround has little to do with specific moves that the government has made so far. With a ho-hum global economy and the emerging markets in particular having lost their former sheen, India served a need. Businesses and investors do not like a vacuum, and they would rather not stick their money under mattresses. They crave positive news, and the Indian economy had the perfect convergence of all things good. First, there was the $50 billion windfall to the economy towards the end of last year because of falling oil prices. Second, the Modi PR and diplomacy machine has done well to orchestrate photo ops and bear hugs with the right assemblage of global leaders…

Read the full op-ed ]]>“Burkina Faso, Tunisia, Burkina Faso, Egypt, Burkina Faso!” These words—rallying citizens to join other countries in revolt against the established government—rang loud and clear in the streets of Burkina’s third largest city, Koudougou, during the 2011 uprising that followed the Arab Spring. While that protest and mutiny movement did not immediately accomplish its objective of electing a new leader that would help lift the country from the bottom of most international development and well-being indicators, the demonstrators came closer to their goal on October 31: The fury of Burkina’s “Black Spring” successfully removed the country’s president, Blaise Compaoré, who had held the position for 27 years.

The continued discontent in Burkina Faso and across the continent goes beyond transference of power. The underlying causes are poor governance and woefully few employment opportunities for a large and growing youth cohort. This is partly due to a stagnant private sector and an overreliance on civil service employment, where thousands of youth apply for only a handful of vacancies year after year. The country needs a new approach to succeed where government and traditional business have failed, and social enterprise offers just that.

While institutions such as rule of law and land tenure rights remain important, countries like Burkina Faso need private businesses that are intent on creating positive social impact to correct and overcome market failures perpetuated by poor governance and policies. In creating both social and commercial value, these enterprises encourage economic stability while giving a greater voice to those who are marginalized by strongmen like Blaise Campaoré. Throughout the region, social enterprises are providing electricity and clean drinking water to ignored rural areas, educating overflow students from strained public schools, and improving agricultural yields and processing capabilities for smallholder farmers. The social enterprise model holds great opportunity for addressing the economic malaise threatening Burkina Faso and others in the region…

]]>published an article to the Harvard Business Review. The article is titled, Where the Digital Economy is Moving the Fastest. The article discusses the research of Chakravorti, Tunnard, and Chaturvedi with using a Digital Evolution Index to determine the readiness of various countries for a digital economy. ]]>Poor Europe can’t catch a break. The region’s not only trying to keep its currency together, but also struggling to keep up with the fast-moving digital economy.

The Digital Evolution Index, created by the Fletcher School at Tufts University, paints a grim picture of the state of technological innovation in the self-anointed old continent. The top 10 nations with the most negative scores over time hail from Europe, barring Australia.

For Nordic countries such as Norway and Finland, which have a hallowed history of innovation, the index serves as a warning that they’re losing momentum. Just look at what happened to Nokia, once the world’s largest maker of mobile phones. For the likes of Portugal and Spain, it means they are falling even further behind.

Leave it to Asian nations to yet again lead the charge of priming their economies for electronic commerce. Not only does Singapore occupy the top spot as the most digitally innovative country, the three biggest gainers — dubbed the “breakouts” — also come from the South China Sea region.

]]>The Fletcher School's Digital Evolution Index is featured on "Trending Business" with Bloomberg's Shery Ahn. The index demonstrates Europe's struggle to keep up with the fast-moving digital economy, and Asia's simultaneous success in digital innovation.

]]>In the coming decades, the majority of the world’s economic output and market growth will come from the emerging markets. Already, the seven largest emerging markets collectively contribute more to global output than do the G7 countries combined. That said, once one gets beneath the aggregate statistics, these emerging – and dynamic – markets are rife with inequities, bottlenecks and missing institutions.

The societies in each of the emerging markets face many economic challenges – most of which have to do with the potential for fast growth being undermined by a lack of inclusive growth. This is a tension that global companies cannot ignore as they look to the emerging markets as the primary sources of growth in the coming years.

Under-investment in inclusive growth can pose a challenge to growth itself. The majority of citizens of the newly developing economic powerhouses do not have access to products and basic services we would take for granted in the industrialized world.

Consider some examples: more Indians have access to mobile phones than to toilets; Brazilians live in a country with an abundance of fresh water sources and yet many contend with crippling shortages; and only 20 percent of Indonesians have access to a bank account...

Read the full op-ed ]]>The transition to a global digital economy in 2014 was sporadic – brisk in some countries, choppy in others. By year’s end, the seven biggest emerging markets were larger than the G7, in purchasing power parity terms. Plus, consumers in the Asia-Pacific region were expected to spend more online last year than consumers in North America. The opportunities to serve the e-consumer were growing – if you knew where to look.

These changing rhythms in digital commerce are more than a China, or even an Asia, story. Far from Silicon Valley, Shanghai, or Singapore, a German company, Rocket Internet, has been busy launching e-commerce start-ups across a wide range of emerging and frontier markets. Their stated mission: To become the world’s largest internet platform outside the U.S. and China. Many such “Rocket” companies are poised to become the Alibabas and Amazons for the rest of the world: Jumia, which operates in nine countries across Africa; Namshi in the Middle East; Lazada and Zalora in ASEAN; Jabong in India; and Kaymu in 33 markets across Africa, Asia, Europe, and the Middle East.

Private equity and venture capital money have been concentrating in certain markets in ways that mimic the electronic gold rush in Silicon Valley. During the summer of 2014 alone $3 billion poured into India’s e-commerce sector, where, in addition to local innovators like Flipkart and Snapdeal, there are nearly 200 digital commerce startups flush with private investment and venture capital funds. This is happening in a country where online vendors largely operate on a cash-on-delivery (COD) basis. Credit cards or PayPal are rarely used; according to the Reserve Bank of India, 90% of all monetary transactions in India are in cash. Even Amazon localized its approach in India to offer COD as a service. India and other middle-income countries such as Indonesia and Colombia all have high cash dependence. But even where cash is still king, digital marketplaces are innovating at a remarkable pace. Nimble e-commerce players are simply working with and around the persistence of cash…

]]>Amazon.com Inc. packages ordered by its Prime members regularly arrived late over the holidays, a Reuters/Ipsos survey shows, reflecting the strain on the logistics network that transformed the company into an e-commerce powerhouse.

Customer satisfaction with Prime is extremely high - 96 percent are happy with its two-day shipping service, the survey revealed. But the results raise questions for Amazon as it expands and takes greater control of its shipping system…

… The survey figures reflect the complexity and high cost of shipping orders from distribution centers to customer's homes -the so-called "last mile."

"As Amazon keeps raising the bar, it keeps raising the business risk for itself because the last mile is a messy place," said Bhaskar Chakravorti, senior associate dean for international business and finance at Tufts University's Fletcher School [of Law and Diplomacy]…

Editor’s note: Ms. Judge will be honored in a ceremony to be held at The Fletcher School’s ASEAN Auditorium on Friday, March 6, 2015 — timed to coincide with International Women’s Day, which is celebrated annually throughout the world on March 8.

By any traditional accounting measure, Faire Collection, the New York–based artisanal jewelry company founded by Amanda Judge, MALD ’09, has seen major success. In the seven years since its founding, the company has grown from just $10,000 in start-up capital to well over $1 million in sales revenue.

Then there’s less traditional accounting: mattresses, for example.

In rural northern Ecuador, where Judge first conceived of the idea to combine fair trade jewelry and social development, the artisans she’s partnered with have seen their lives transformed. Cookstoves have replaced open fires. The artisans and their families eat meat instead of only potatoes, and use bathrooms instead of open fields. And for Olga—one of Judge’s first partners—mattresses have replaced straw mats.

“For Olga, the mattresses were even more exciting than the car she bought with her earnings,” says Judge. “The work we’re doing is not on a massive scale, but it’s really profound in the circles that we’re dedicated to.”

All told, Judge and Faire Collection now work with more than 200 artisans. Seventy are in Vietnam and the rest in Ecuador.

Mattresses aside, the impact that Judge’s efforts have had in Ecuador are substantial. Faire Collection’s production company there offers various training sessions, including regular classes on issues like family planning and domestic violence, which are open to the artisans and community members.

In recognition of her innovation and her success at alleviating rural poverty, Judge is this year’s recipient of the annual Fletcher Women’s Leadership Award (FWLA). The award was established in 2014 by the Fletcher Board of Advisors and the School’s executive leadership to honor outstanding female graduates who are making a meaningful impact in the world in the private, public and NGO sectors.

“Amanda demonstrates the qualities that are emblematic of Fletcher alumni. She has been passionate, persistent and creative in providing people with market-driven opportunities to use their skills and artistry to build businesses of their own,” says Leslie Puth, MALD ’11, chair of the FWLA committee. “Not only has Amanda been instrumental in changing the lives of hundreds of artisans and their families in countries like Ecuador and Vietnam, she has built a very successful business. Her leadership, compassion and commitment truly recommend her and inspire others.”

Faire Collection at work with artisans.

For Judge, 34, artisanal jewelry and economic development in impoverished communities is a creative extension of the “rogue” jewelry shops that she and her friends used to set up in her parents’ garage when she was growing up in Arlington, Massachusetts.

After getting a degree in finance from Santa Clara University, in California, she worked in a series of private sector finance jobs: accounting and marketing positions, mainly on the West Coast. But, she says, she was uninspired by “corporate work.”

“I kept thinking, ‘I want to be doing something that has an impact…I want to do something that I feel proud of,’” she says.

Having grown up so close to Fletcher, she wanted to attend but knew no foreign languages, a graduation requirement. In 2006, while working for a Seattle financial services company, she volunteered doing data analysis for FINCA, a Washington, D.C.–based microfinance organization. When she won an internal competition, she requested a meeting with FINCA’s CEO, John Hatch, and went to D.C. to meet him in person. He advised her to travel abroad and learn Spanish and promised to write her a recommendation once she did.

Judge ended up in Peru, volunteering for FINCA, working with indigenous women to increase the profitability of their artisanal exports. That experience, in addition to improving her Spanish, opened the door for her to enroll at Fletcher.

“I’m not necessarily a very academic person,” she says. “But I loved the curriculum. I loved the flexibility to make it what you wanted."

“I didn’t like the idea of doing exercises for exercise’s sake. I always wanted it to have some relationship to what was going on in the world,” she says.

Judge took courses with Kim Wilson, a lecturer in international business and human security; Michael Klein, the William L. Clayton professor of International Economic Affairs; and Julie Schaffner, visiting associate professor of development economics. She also completed two internships, the second of which took her to northern Ecuador, doing a market research field survey, again for FINCA.

While she was there—in Otavalo, about a two-and-a-half-hour drive north of Quito—she researched “income flows” for some of the families. The men were typically doing small-scale farming, the women artisanal craft work or selling produce on the roadsides. Judge started thinking about how the “flows” could be made higher and more sustainable by differentiating products, finding better prices for raw materials, or exporting more.

“When that dawned on me, I called up Kim Wilson. I told her I didn’t want to do my thesis anymore,” she says. “What I wanted to do was create a business plan. I would come back to Fletcher after my internship, take my classes and start the company based on that business plan.”

Her remaining time at Fletcher was spent primarily getting Faire Collection off the ground, using some savings she had accumulated and start-up capital in the form of a graduation gift from her mother. (“I hope that no one actually goes back and looks at my grades from then,” she says, laughing.)

Seven years later, the company now has 10 employees based in Brooklyn, New York, and a satellite office in the Hudson Valley, and six with its Ecuadoran production operations. The designs, the models and the feel of its website, shopfaire.com, wouldn’t be out of place on the pages of Vogue or Cosmopolitan.

Judge says she hopes her company can help change American consumers’ perceptions, from helping the poor out of charity to buying artisans’ products because of their beauty and quality.

“It’s chic jewelry that the fashion industry has embraced but customers can also be proud of,” she says. “It’s a celebration of the artisans, their culture and their heritage.”

--Mike Eckel (F13)

]]>Online retailing around the world is expected to grow 16.5% annually between 2013 and 2020 outstripping the Compound Annual Growth Rate of global GDP at 3.7%. Of course the growth rate of online retailing will alter by individual country with more mature markets growing at lower rates than those in developing markets. However, global cross-border online sales are predicted to grow at the even higher rate of 26.6%...

…However, building a site, growing brand awareness and trust in new markets, handling logistical issues of customers wanting free delivery and overcoming the perceived difficulty of returns is just one side of the strategic process.

The way people engage digitally is changing fast and retailers have to continually listen and watch to truly understand the opportunities and make them matter to people where they are.

“There is very little about the digital past and present of the West that instructs us about the digital present and future of the rest,” believes Bhaskar Chakravorti, Senior Associate Dean of International Business and Finance at The Fletcher School. “The momentum and direction of countries over time result from the interplay of the systemic elements of supply, demand, institutions and innovation. In the experience of the West these four drivers are more tightly connected. In the case in emerging markets – where the next billion e-consumers are – some of these drivers move much faster than others; the trajectory is non-linear and you could end up with surprises such as Alibaba in China or Flipkart in India or M-Pesa in Kenya.”…

]]>I also want to thank you for not making me dance again,” said the first American president at the Republic Day parade, and the first to visit India twice while in office.

Amid the multiple bear hugs and the shock of hearing Prime Minister Narendra Modi break out in English, prompting his own hidden reserves of Hindi in response, surely President Barack Obama had missed the exquisite choreography marking The Visit. Every step and rhythm had been worked to perfection: the son of the chaiwallah pouring the president’s chai, photographs of the bro-stroll around the stately paths of Hyderabad House, the mouth-watering menu of mustard fish curry, gushtaba, and achari paneer, the unprecedented two hours of sitting out in the open on Rajpath causing the biggest security headache in the history of the Secret Service, the parade comprising Russian-made MI-35 helicopters overhead and Russian-made T-90 tanks rumbling down the rainy majestic boulevard, barely hours after the US was all set to make sure that future parades of armaments will be vastly more American-made.

A lame-duck US president usually has few friends left in Washington DC, and even fewer in other nations’ capitals. But in New Delhi, he seemed to have finally found a dance partner: the Barry and Narry duo were in sync and barely missed a step.

Mind you, the dance of diplomacy should not be taken lightly. It is time the two countries put the embarrassment of Khobragate behind them and got serious about the real pain points for Obama’s foreign policy: the triumvirate of China, Russia, Pakistan. It is time to finally recognise that befriending India is a diplomatic hat-trick: a single ally to counterbalance all three annoyances. For this alone, the chai, the cha-cha-cha and the rest of the hoopla was worth it.

Obama missed an essential truth: that you can never escape song and dance numbers, central to any Indian production. Obama also seemed to have missed the fact that he had deftly danced around three big issues: earth, wind and fire...

]]>Despite Saudi women still being forbidden to drive and requiring permission from a male guardian before being legally allowed to travel, their rights actually advanced under King Abdullah — who died on Friday aged 90 — albeit at a painfully slow rate.

Abdullah’s tenure on the throne of the oil-rich kingdom saw restrictions on women entering both education and the workforce eased — a change that encouraged thousands of Saudi women into the professional world. Such was the impact that Christine Lagarde, head of the International Monetary Fund, described the late ruler as a “strong advocate for women.”…

… Ibrahim Warde, an adjunct professor at [The Fletcher School at] Tufts University who taught at the Dar El Hekma in May, said the King’s educational initiatives were facilitated by the political space created in the aftermath of the Sept. 11 attacks, which put pressure on the kingdom to confront extremist ideas. “There was a sense that reform is necessary,” he said.

The impulse for reform, however, required a careful balancing against the need to appease the conservative clergy whose support is a key source of domestic legitimacy for the Saudi monarchy — dating back centuries to a pact between Ibn Saud, founder of today’s ruling family, and conservative Muslim scholar Muhammad ibn ‘Abd al-Wahab, father of the Wahabist tradition in Islam. Religious conservatives staged protests at the palace when they deemed reforms had gone too far.

“It’s clear that the king had ambitious goals but that he seemed to be very conscious of the weight of tradition,” Warde said. “There was the sense that by going too fast you may antagonize the more traditional part of Saudi society.”…

]]>Mass demonstrations of solidarity in favor of free speech and against the Charlie Hebdo killings are understandable, but they could inadvertently give cover to actions that subvert the very liberties the protesters cherish. Legitimate public outrage should not be channeled into declaring or escalating wars on Islamic (or any other kind of) terror. Democracies should coolly rely on existing tools and procedures against criminal conspiracies.

The Paris killings certainly have special features. They weren’t an episodic rampage like the 2002 Beltway shootings by two snipers. The murderers, like the antiabortionist killers of doctors egged on by a Catholic priest David Trosch, were religious fanatics. But unlike doctor killers - or the cultists who spewed Sarin gas in the Tokyo subway - this kind of carnage isn’t local. Islamic fanaticism, like the barbarity of many Christian conquistadors in centuries past, traverses continents. And the targets aren’t just infidels: like the pro-slavery mob that killed the abolitionist editor of the Alton Observer in 1837, or the union organizers who dynamited the LA Times building in 1910, the Parisian killers had free speech and a free press in their gun sights.

The killings also evoke a stronger visceral reaction than, say, Boko Haram’s massacres in Nigeria. People naturally care more about their own. Westerners were more moved by the 2004 Tsunami that claimed about 200,000 lives, because the toll included about 9000 Western tourists, than by the 1976 earthquake in China, which claimed tens of thousands more. The killings of eleven Charlie Hebdo employees has similarly agitated journalists more than did the tenfold larger number of government workers blown up by Timothy McVeigh and Terry Nichols in Oklahoma City in 1995.

Yet, even if the killings weren’t run-of-the-mill crimes, what advances could protests propel? Homicidal zealots are likely to be elated, not dismayed, by the condemnation of non-believers. Moderate Muslim leaders or preachers might be shamed into stronger denunciations of Islamic terrorists but such denunciations are also unlikely to have much effect. Even harsh reprisals inflicted on neighbors and relatives have not ended suicide attacks by Palestinians on Israelis. Moreover such collective punishment would now be unthinkable in the US and in West European democracies - mass internments of blameless Japanese-Americans ended with the Second World War.

As France begins to craft their response to the attacks, Western governments could turn to a form of profiling that Edmund Phelps called “statistical discrimination.” This wouldn’t have to be done as crudely as the police “profiling” of African-Americans: only Muslims with statistically high risk factors could be singled out. Some of this is already done: it is no doubt harder for a Yemeni Muslim to get a visa to the US than say a British Muslim (Yusuf Islam, formerly Cat Stevens, apart). Likewise, US citizens who visit Mosul in ISIS-controlled Iraq presumably attract more attention than if they visit Petra in Jordan. Moreover, statistical discrimination has become routine in the financial sector. Many lenders rely exclusively on statistical models and credit scores to make car and student loans, and the government virtually mandates models for mortgages. Why not do this more broadly and systematically to catch terrorists?...

]]>The shale oil revolution is providing a great gusher of profit, jobs, and swaggering entrepreneurship. It epitomizes the optimism surrounding America’s economic recovery.

Indeed, the rise of hydraulic fracking from Montana to Texas to Pennsylvania has lifted U.S. oil production mightily, from 5.6 million barrels a day in 2010, to a current rate of 9.3 million. And until late last year, it was widely accepted that our output would keep rising in 1 million barrel-plus annual leaps for years to come.

The recent drop in oil prices poses a major challenge to the frackers. But oil producers, Wall Street analysts, and most industry experts claim the setback will be brief and minor.

Don’t believe them.

The basic economics of fracking—what it costs to drill versus what oil now sells for—spells big trouble for the shale boom. At best, today’s producers may be able to hold production close to current levels. What’s gravely endangered is the advertised bonanza that virtually everyone deemed inevitable just a few short months ago...

...Still, the future of fracking is extremely hard to predict. Continental, for example, pledges to raise production in 2015 despite the fall in its drilling budget. It would be a mistake to underestimate the ingenuity of the entrepreneurs who led the shale revolution. They will exploit new technologies that combine vertical and horizontal drilling to lower their costs. In the boom times, equipment rental, trucking, and labor were all priced at huge premiums; at $100 a barrel oil, producers put sinking the next well far ahead of fretting over their fat payrolls. Now, those costs are falling.

So it’s difficult to know where all-in costs will settle. If oil stays at around $50, a group of super-efficient producers may still be able to make money. Bruce Everett, who teaches petroleum economics at the Fletcher School at Tufts University, is optimistic. “There will undoubtedly be some tailing off in U.S. drilling activity,” he says, “but I expect continued development drilling in major new areas, particularly the Bakken, even at $50.”

]]>What’s not to love about Opec? There has rarely been a better model of an international body banding together with a mission to stabilise a stubbornly unstable market. As steward of 75 per cent of the planet’s crude oil reserves, Opec can give the US Federal Reserve, the United Nations and Al Gore a run for their money in its power to simultaneously influence the world’s economy, its politics and its climate.

For all its efforts, Opec has rarely had much affection directed its way from the rest of the planet in its 54 years of existence. Granted, few have gone to the extremes of Carlos the Jackal, who took it upon himself to kidnap several oil ministers of Opec member countries back in 1975. But the organisation forever remains a prisoner of that pariah of a label: cartel. Further, Opec’s price-fixing — a must for all cartels — unfortunately contributes disproportionately to inflation and economic downturns worldwide. Its stock in trade, fossil fuels, is blamed for making oceans rise, environmental degradation of cities and profoundly distorted weather patterns. Its member governments are generally not terribly popular in the international community, and mostly not even with their own citizenry. Opec’s is, indeed, a thankless task.

Despite all its challenges, thanks to the extraordinary leadership of the Saudi Arabians, Opec recently stood up to the upstart unconventional North American producers scouring shale and tar sands for “tight oil”. Opec’s solidarity in not cutting supplies has launched a price war — sheikhs vs shale, as The Economist puts it. Arcane price benchmarks, from West Texas Intermediate to Brent crude, plunged — exactly what the Saudis were hoping for, to slow US shale production by making it uneconomical. Economics professors used to love to use Opec as an example of a solution to one of the enduring problems of game theory — the prisoner’s dilemma. In its November meeting in Vienna, Opec produced a brand new game-theoretic lesson — keep prices lower than a “break-even price”, enough to deter those rascally entrants. Indeed, the strategy appears to be working in the near term. Already, new well permits for North American shale oil and gas fell 40 per cent in November. By all accounts, behind an agreement on this price cut was a painful process of arm-twisting by the Saudis.

Mimi Alemayehou is an Executive Advisor and Chair of Blackstone Africa Infrastructure LP, a premier global investment and advisory firm. She is also a Managing Director at Black Rhino Group, a Blackstone portfolio company. Prior to joining Blackstone and Black Rhino, Mimi was appointed by President Barak Obama to be the Executive Vice President of The Overseas Private Investment Corporation (OPIC), the development finance agency of the U.S. government. Previously, she was appointed by President George W. Bush to serve as the United States Executive Director on the board of the African Development Bank (AfDB). Prior to AfDB, Mimi was the Founder and Managing Partner of Trade Links, LLC, a development consulting firm. She also managed a multi-country trade project in Africa for the International Executive Service Corps, and was Director of International Regulatory Affairs for WorldSpace Corporation, a satellite telecommunications company. Mimi, an Ethiopian born naturalized US citizen and a mother of two, holds a Masters degree in International Business and International Law and Development from the Fletcher School of Law and Diplomacy, Tufts University. Addis Standard interviewed Mimi on her career, past and present, her congressional testimony and her life as a mother.

Addis Standard -You left the Executive vice President post at the Overseas Private Investment Cooperation (OPIC), where you were the hand-picked choice of President Barak Obama, for Black Rhino Group and became its new Managing Director. But many people thought of OPIC as the climax of your career. Do you believe that?

Mimi Alemayehou - I have always believed that life is a journey of learning; there is no end to it until you are no more. While I absolutely enjoyed my job at OPIC during the last four years, I do not believe OPIC was the climax of my career. There is much more in my future. While at OPIC, I saw that many countries in Africa, including Ethiopia, were experiencing a different kind of transformation that I have not seen in my working career. A very important part of that transformation was the private sector and I definitely wanted to be a part of that sector, including moving back to the African continent to do it. I am currently serving a dual role as Executive Advisor and Chair of Blackstone Africa Infrastructure LP and also as a Managing Director of one of Blackstone’s portfolio companies, Black Rhino Group. Blackstone is the premiere global investment and advisory firm, managing almost $300 billion and extremely committed to developing large, highly development infrastructure projects in key markets in Africa through its infrastructure platform – Black Rhino Group.

Energy is a sector the government in Ethiopia has shifted its focus into as of late. Is there any plan by Black Rhino to work with the government of Ethiopia? Can you tell me about the rumored gas pipeline from Ethiopia to Djibouti that involved Black Rhino?

Black Rhino is now a portfolio company of Blackstone so it is owned by Blackstone. Black Rhino is currently in discussions with both the governments of Djibouti and Ethiopia on a potential refined products pipeline between Djibouti and Ethiopia. We have just completed a preliminary feasibility study and look forward to working with the governments of Djibouti and Ethiopia. It is still in the early stages of development; and for this project to succeed, it has to make economic sense for both countries and incorporated in their growth strategies. As you may know, Blackstone/Black Rhino has an important partnership with Dangote Industries, which was announced at the historical US-Africa summit in August 2014. We have committed to invest US$5 billion together in infrastructure projects.

Amar Bhide, Thomas Schmidheiny Professor of International Business at The Fletcher School at Tufts University, spoke on a panel titled "Is Economic Dynamism in Decline?" at the Cato Institute on December 4, 2014. He shared the panel with Professor John Haltiwanger of the University of Maryland and Professor Alex Tabarrok, Bartley J. Madden Chair in Economics at George Mason University. Cato Institute Senior Fellow Peter Van Doren, Editor of the quarterly "Regulation", moderated the panel and introduced the speakers. The panel was part of a Conference on The Future of U.S. Economic Growth organized by the Cato Institute.

Professor Bhide begins by saying that it does not appear to him, from his studies, that economic dynamism is in decline. What has caused concern is reports of low productivity growth, but even this phenomenon is nuanced. Modern innovation, he says, is more "widely inclusive" than was historically the case. Today's innovation is no longer driven by individual genius, but rather draws on the talents of "an army of people with a wide range of talents" to produce useful and affordable products right from the early stages of their work. This is matched by what Bhide calls "widespread venturesome consumption," in that purchasing in a high-innovation economy is itself to take on a form of risk. Consumers have also been part of the innovation process itself, spending considerable time and effort in tweaking and tailoring products they acquire. It is the existence of such consumers that enables innovators to recognize economic value from their inventions.

Professor Bhide then goes on to critique the concept of "creative destruction," pointing out that there is an important complementarity between this process and the parallel process of non-destructive creation, which enables continuity and an ongoing innovation process. He further explores some of the drivers that have enabled this modern process of innovation: diversity of organizations with increasing specialization, changes in beliefs and attitudes about technology, eroding aspirations for long-term employment, the development of management techniques to sustain innovation, and the expansion of higher education. All of these, he notes, are enablers that have accelerated over the past two or three decades.

]]>With the exponential growth in internet penetration worldwide, digital technologies are fundamentally altering the nature of markets and economies. Every market is going digital, and business models are evolving to match consumer behaviour in this hyper-connected environment.

Dr. Bhaskar Chakravorti, Senior Associate Dean of International Business and Finance at The Fletcher School of Law and Diplomacy and Founding Executive Director of The Institute for Business in the Global Context, speaks to The Smart Manager about the global digital landscape and the development of The Fletcher School's Digital Evolution Index.

]]>Mobile phones are spreading faster than any other information technology — global subscriptions will reach 5 billion this year. In wealthy countries, the saturation is over 100 percent, with some people owning more than one device.

In developing countries, the subscription rate has reached 59 per 100 people, and is rising fast — that figure was just 2 per 100 a few years ago. And it might be one of the most powerful solutions to lift some of the poorest people out of poverty, according to a new United Nations report out earlier this month.

Mobile technology has leapfrogged other technology — like Internet or land-line phones, into the hands of some of the world's poorest citizens, and is combating poverty in unexpected ways.

Mobile technology allows people in rural places to save money and get access to credit, and saves them money in fees and travel, says Ben Mazzotta, a researcher at the Fletcher School at Tufts University, who studies mobile and cash-free transactions in Mexico, India and Central America.

"People can invest in health, education and save themselves trips from tiny remote villages just to conduct transactions that most of us take for granted," he says…

]]>At a time when news about Africa has been dominated by Ebola, it’s worth observing that a highly encouraging change has been quietly spreading across the continent. Over the past five years, the number of Africans — mainly women — who have joined village-based savings and loan associations has soared to more than nine million. These groups are now operating in 40 countries in Africa. Globally, it’s estimated that 10.5 million people are members of formally trained savings groups in about 65 countries. The big story about these groups, including their surprising success and emerging importance in development, comes from Africa.

“A giant informal economic system is emerging invisibly,” said Jeffrey Ashe, a micro-finance pioneer and co-author of the book “In Their Own Hands: How Savings Groups Are Revolutionizing Development.” “We can think of it as the amoeba model of microfinance. It’s financial inclusion without financial institutions — and each group has the DNA within itself to self-replicate.”…

… But there may be other possibilities. “Up to this point the spread has been fairly mechanical,” said Kim Wilson, a microfinance expert who is a lecturer at the Fletcher School at Tufts University (and co-founder of a terrific website about micro-savings). “You have promoters who go out and form these groups. But have we looked at mass media, local radio or TV? Can we spread the word in a way that’s more efficient than we’ve been doing?”

]]>In Capital in the Twenty-First Century, Thomas Piketty announced an audacious thesis that sets his opus apart from most other works of economic history. Capitalism inevitably increases inequality, Piketty claims, because the return on capital grows faster than the economy.

Bold claims in other fields can be quickly verified or debunked. In 1984, Barry Marshall, an Australian doctor, silenced skeptics and overturned longstanding beliefs that ulcers were caused by poor diets or stress, after he infected himself with the H. pylori bacterium and induced an ulcer.

Stanley Pons and Martin Fleischmann purportedly demonstrated the occurrence of cold fusion. A few researchers were able to reproduce the same result, but most other efforts at replication failed. Scientists concluded that observations of cold fusion were simply the result of experimental errors.

Replication won’t resolve whether Piketty has discovered an economic law about the root cause of inequality that had eluded generations of researchers. Economists cannot run independent scientific experiments—they have to rely on the same historical data to advance or refute their theories. Inevitably, economists with different preconceptions offer different opinions about what the same data tell us. Milton Friedman, who extolled historical analysis, conceded that researchers tend to resolve the unavoidably ambiguous results of historical analysis in favor of their pet theories. Economists, whether Keynesians or monetarists or supply-siders, find proofs of their theories wherever they look, even when they look in the same places...

]]>The pitch to investors described a company on the verge of spectacular success: a Chinese firm making sophisticated, high-end chemicals used to fight fires, stain-proof fabrics and toughen touchscreens. Tianhe Chemicals Group Ltd. boasted rock-bottom labor costs, unique manufacturing techniques and net profit margins triple those of competitors such as DuPont Co. and 3M Co…

… Tianhe’s stock has since lost much of its luster. A mysterious group, allied with speculators betting against Tianhe’s stock, alleged that the company had exaggerated the value of its business. Then Hong Kong regulators froze the $7.9 billion company’s stock for more than a month. Since the allegations were made, Tianhe has lost 39 percent of its value.

Morgan Stanley’s private equity team and its stock analysts have reaffirmed their confidence in Tianhe’s management since the company’s reputation came under attack. But a two-month investigation by The Associated Press identified significant discrepancies in publicly accessible financial records and statements Tianhe made to investors, including questions about whether its chairman sold himself Tianhe’s main assets while he was running a predecessor company owned by the Chinese government…

… Records identified the company as the property of local Chinese government organizations. That would be significant because current shareholders would wonder whether the company had a clean, clear chain of ownership for its own business. No history of state ownership is mentioned anywhere in Tianhe’s prospectus.

“Absolutely, knowing the provenance of the asset does make a difference,” says Jonathan Brookfield, a [Fletcher School at] Tufts University professor who has studied the sometimes unclear line between public and private ownership in China. “Around the world, you see that when a state asset gets privatized, sometimes it gets nationalized again.”…

]]>While the Diwali fireworks have died down, it is becoming clear that as far as the annual shopping season goes, 2014 has brought some explosive changes. The business of Diwali may never be quite the same after this year. According to some retailers, not enough shoppers were lining up at the shops, upending a time-honoured tradition. The Future Group’s chief, Kishore Biyani, pretty much summed it up in a quote in The Wall Street Journal: “The market has been bad”. On the flip side, according to almighty Google, “The internet is increasingly becoming the preferred source of research (and even purchase) for Indians, and searches on Google clearly show the rush of searches around Diwali.”

More and more Indian shoppers are turning to their phones and computers instead of braving the traffic to make their purchases for the festival season; it seems the trend accelerated this year. Of course, 2014 was also the year when records were broken in Indian e-commerce; in excess of $3 billion poured into the nascent Indian e-commerce market over the summer. ASSOCHAM expects online sales to hit the Rs 10,000 crore milestone this year. With the tech research firm, Gartner, predicting 70 per cent growth in the Indian e-commerce market by next year and The Fletcher School-MasterCard Digital Evolution Index placing India as a “break out” country in terms of digital evolution, we may be looking at a future filled with digital Diwalis.

This is a transition that is remarkable for the simple reason that despite the liberalisation of the Indian economy and the growing interest of international players in getting a toehold in one of the world’s highest potential consumer markets, Indian retail has stubbornly resisted change. It had remained fragmented, chaotic and inefficient, a postcard from the “old” India. The political and regulatory establishment could never quite make up its mind about whether to enact the bold laws to truly nudge it towards modernity. With the rise of digital players, Indian retail may be sidestepping decades of dithering. Digital retail is forcing a competitively feisty space, with innovation in branding, business models and funding that retail has never witnessed before.

]]>SIR – India’s government may hope to turn Air India around under state control, though the new civil-aviation minister has provided little direction (“Yes, prime minister”, October 18th). He does not need to look far for a solution. IndiGo airlines has succeeded through innovative management, meticulous planning and coherent brand positioning, based around on-time performance and cleanliness, clear selling points for a low-cost carrier. In contrast, Air India has reduced routes, cancelled orders, and accumulated $5.9 billion in losses over the past six years.
Although privatisation is an option for beleaguered Air India, providing it with a clear mandate and measurable operational targets is a better way to attract customers than just a generous 30kg baggage allowance.

- Jonathan Brookfield

Associate Professor of Strategic Management

[The Fletcher School at] Tufts University

- Vamsi Valluri
Medford, Massachusetts

Read the full story ]]>That Ebola arrived in New York, was not entirely surprising; New York is, after all, the prime gateway city for travelers to the U.S. What is surprising -- no, shocking -- is that it has, for now, departed from another gateway city, much closer to the disease epicenter: Lagos. The chaotic megacity of 21 million was introduced to Ebola by a single carrier, Patrick Sawyer. He passed the disease onto his doctors, nurses and a police officer. 20 were infected, 7 died. Today, Lagos is Ebola free. How did a government that is so dysfunctional and a city so chaotic manage such a feat? Remember, this is the country that has still not been able track down the 200 girls abducted by Boko Haram, the extremist group and continues to be ineffective in preventing random terror attacks and day-to-day crime and corruption.

How did Nigerian authorities -- contrary to the worst fears of global public health experts -- get essential information out and collect enough data to keep track of everyone who might have been exposed to the deadly virus? Nigerian health officials, working alongside the World Health Organization and the US CDC and others, managed to reach all of the known contacts in Lagos and 99.8% of the population at the second outbreak site in Port Harcourt, the country's oil hub. Local communities, traditional and religious leaders as well as celebrities were brought into the effort to support containment measures.

Without question, a central tool in the fight to contain and drive out the scourge of Ebola is the digital communications infrastructure. Already, projects that combine multiple digital innovations, including crowdsourcing and supercomputing are being tied together by a partnership led by IBM in Sierra Leone, where the disease is spreading quickly and has already killed more than 3,000 people. Given the primitive state of Sierra Leone's digital foundations, it is useful to know if Nigeria's digital ecosystem was good enough to explain the country's remarkable success.

… A good investment strategy is to be broadly diversified, especially if the investments include global assets, said Patrick Schena, co-head of [The Fletcher School] Network for Sovereign Wealth and Global Capital at Tufts University in Medford, Mass.

“Know your investment horizon and manage your portfolio risks in line with it,” he said. “Over long horizons and in well-diversified portfolios, the impacts of geopolitical risk can ‘even out’.”

"Supply Chain Reaction" asks, what do human rights have to do with the economy?

As consumers in a rapidly growing world economy, we have an insatiable appetite for the next greatest electronic gadget, like smartphones and TVs. But can we consume cheap imported products without exploiting someone in the supply chain?

Amar Bhide, Thomas Schmidheiny Professor of International Business at The Fletcher School, interviewed in this short film by acclaimed director Jehane Noujaim ("The Square"). The film is one of 20 featured in "We The Economy: 20 Short Films You Can't Afford To Miss."

]]>A year ago, I noted the importance of speed for Xi Jinping. In particular, it seemed incumbent on Xi to move quickly to establish his authority and engage in activities that could help ensure his control of the Politburo Standing Committee (PSC), the highest policy making body in the People’s Republic of China (PRC). A year later, Xi’s intention to move quickly to consolidate his leadership position seems increasingly clear, and politically, he seems to be operating with an increasingly deft hand. That said, with the property sector cooling off and economic growth in the PRC coming in on the low side of expectations, all of Xi’s political skills are likely to be put to the test as economic constraints begin to tighten.

As far as speed is concerned, after the third Plenum in 2013, many foreign commentators were impressed with the potential breadth and depth of Chinese economic reform. More recently, Barry Naughton, a China specialist at the University of California San Diego, has described Xi Jinping as being engaged in a kind of “shock and awe” campaign. He sees Xi as currently engaged in economic reform, an assertive nationalism, anti-corruption, and a crackdown on the free expression of ideas, while simultaneously looking to re-establish strong party leadership. In particular, by heading up the Leading Small Group for Comprehensively Deepening Reform, Xi has effectively taken over responsibility for economic policy making.

In that context, some analysts have worried about the disappearance of top-level design (ding ceng she ji) as an idea. With incremental reform stalling, the idea of broad, structural reform initiated by top leaders, as opposed to a more cautious, Deng Xiaoping “crossing the river by feeling for the stones” (mo zhe shi tou guo he) approach to development, seemed to hold out the promise of substantial economic liberalization. If, however, the concept turns out to be an empty slogan, the likelihood of significant economic change in China seems greatly reduced.

Under Islamic law, collecting or paying interest is prohibited, making it difficult for Khan to borrow the roughly $2 million needed to expand his company, Barkaat Foods. But Khan was ultimately able to get the capital for his business — and stay true to his faith -- with the help of a traditional bank and a boutique venture capital firm willing to hammer out arrangement that Khan said was "Shariah compliant."

… "It's a fairly global phenomena," said Ibrahim Warde, an expert on Islamic finance at [The Fletcher School at] Tufts University. "Islamic finance in general has benefited from the financial crisis largely because Islamic institutions have done better than the conventional ones. One of the fundamentals of Islamic finance — beyond not just charging interest — is there must be a direct connection in between the financial product and the real economy. That's made it more attractive."

Simplicity sells. This dictum, advanced by Clay Christensen in The Innovator’s Dilemma has also been central to his book’s blockbuster success. But to what degree are Christensen’s simple, enormously influential propositions reliable?

It’s a mixed bag.

The idea that successful new technologies rarely start out competing directly with the old was groundbreaking. McKinsey’s Richard Foster had claimed that new technologies are generally inferior. If that were so, Christensen countered, why would anyone ever adopt them? In fact, Christensen pointed out, new technologies first find a foothold by providing compelling benefits to peripheral niche markets that are not being well served. Significant improvements then permit some upstarts to challenge incumbents in their core markets. Staples and Amazon, which took on the existing order from the start, are exceptions; even they did not face large entrenched incumbents.

Like many other brilliant insights, this seems blindingly obvious after the fact. It also provides a valuable lesson for entrepreneurs: unless you have a truly breakthrough technology and immense financial resources, don’t aim slingshots at Goliaths. Find and serve those few customers who will find your offering special.

Read the full op-ed ]]>President Obama is talking entrepreneurship again. This is very good news—but only if he means it.

In his speech last week before the U.N. General Assembly, the President addressed “the cancer of violent extremism that has ravaged so many parts of the Muslim world.” It is a mess, arguably more dangerous to the US than anything since 9/11.

But there, not quite buried in Obama’s fourth and final action point for dealing with the extremism crisis, was a true solution: “The countries of the Arab and Muslim world must focus on the extraordinary potential of their people—especially the youth.”

The President’s formula here included a large dose of entrepreneurship. He reminded us that the Muslim world is full of examples of youth thriving in societies that embrace innovation. He cited Malaysia, a Muslim-majority country, as an example of an economy that has leveraged entrepreneurship for impressive growth. And, he said, the U.S. government “will expand our programs to support entrepreneurship, civil society, education and youth—because, ultimately, these investments are the best antidote to violence.”

Read the full op-ed ]]>The method of natural gas drilling known as hydraulic fracturing, or “fracking,” has caused controversy across the U.S. Advocates argue that it promises increased energy independence. For others, it means environmental catastrophe…

“Fracking involves drilling down several thousand feet into a rock formation that holds natural gas,” said Bruce Everett, associate professor of international business at Tufts University’s Fletcher School of Law and Diplomacy. Drillers then pump a mixture of high-pressure water and chemicals into the hole. “That cracks the rock and creates pathways for gas to flow out of the well.”

Drilling operations are left with two products: natural gas and wastewater. There are a few wastewater disposal methods. “You can put the water in a lined pond and let it evaporate, treat it or inject it underground,” said Everett. Injection is the most debated method…

]]>The hopes of the Arab Spring now rest on Tunisia’s legislative election on 26 October. Arab peoples see the chaos in Libya, the war in Syria and Egypt’s new authoritarian regime as proof that they have been abandoned and as signs of western hypocrisy. The economic aid promised in 2011 has not materialised.

Who remembers the Deauville Partnership? In May 2011 the G8 (US, Russia, Japan, Germany, France, UK, Italy, Canada) met in France in the seaside resort of Deauville for their first summit since the Arab revolutions, where they proudly unveiled an aid plan of unprecedented scale for countries affected by the Arab Spring. Politically, this was to support the establishment of the rule of law, with decision-making controlled by the people; economically, it was to ensure the prosperity of the new democracies. France’s president Nicolas Sarkozy described the meeting as the founding moment of a new relationship between the Arab states and the world’s eight most industrialised countries.

The G8 decided to make the success of this “historic transformation” a priority. Bold measures were promised. A package unprecedented in size and content — $80bn and an impressive range of financial and political measures — would ensure a successful “democratic transition” of the states joining the partnership — Egypt, Jordan, Libya, Morocco, Tunisia and Yemen. Ten international organisations and development banks, led by the International Monetary Fund, would handle the logistics. Neighbouring countries — Saudi Arabia, the United Arab Emirates, Kuwait, Qatar and Turkey — would contribute to the project as “regional partners”. Huge amounts of funding and an innovative structure showed the value the “international community” placed on democracy in the Arab world: as the Deauville meeting declared, democracy was “the best path to peace, stability, prosperity, shared growth and development.”

Read the full op-ed ]]>India’s chief pitchman knocked off the world’s three largest economies in an exquisitely choreographed sequence of moves that underscored his geopolitical grandmastery. Prime Minister Narendra Modi started with a visit to friendly territory: Japan. There, after a decidedly un-Japanese bear hug with soul brother, Japanese Prime Minister Shinzo Abe, he returned with commitments for investments not only in much-needed infrastructure but also for this curious thing called “smart cities”. Next, he turned to the much pricklier relationship with India’s largest trading partner by inviting the Chinese president, Xi Jinping, to his very own backyard of Gujarat — on his very own birthday. He managed to collect even more promises for infrastructure investment, despite the tensions with the Chinese on the Ladakh border. How could anyone, even a toughie like Xi, not cut the birthday boy some slack?

Of course, Modi held off announcing his “Make in India” push to take the manufacturing sector up from 15 per cent to 25 per cent until after Xi’s departure. Remember, Xi’s China would be the prime competitor as the world’s top incumbent manufacturer. The “Make in India” move was nicely timed, coming just before Modi’s departure for the US, where he was in full sales mode. The message was: do business with us and make stuff in our factories — and yes, we are working on fixing our shoddy infrastructure. Subtext: forget China, think India.

Modi has shown that he is a consummate geopolitical chess player and pitchman for India. But he missed a chance at demonstrating some imaginative international leadership.

Read the full op-ed ]]>Alibaba Group’s record-breaking IPO last week has put a new focus on e-commerce prospects in China among global investors. One notable growth area in China’s e-commerce field will likely be digital payments, according to Bhaskar Chakravorti, senior associate dean of International Business and Finance at Tufts University’s Fletcher School, who just returned to the U.S. from the World Economic Forum’s Annual Meeting of the New Champions in Tianjin earlier this month. Chakravorti is the lead researcher and author of the Digital Planet report to be released next week. I exchanged with Chakravorti this week about the outlook for digital payments growth in the U.S. versus China. Excerpts follow.

Q. What are the growth prospects for digital commerce in China versus the U.S. in the next five years?

A The past isn’t always the best signal of what’s around the corner, but if the trends of the last five years are any indication the growth prospects for China’s digital commerce market are zooming ahead of practically every other country in the world. In addition to the spectacular public flotation of Alibaba, China tops our “Digital Planet” study’s analysis of the 50 most significant e-commerce ready countries in terms of its pace of evolution toward a digital economy, while the U.S. comes in 30th. With factors such as innovation ecosystems and public sector and regulatory institutions driving the pace of change, the stark differences between China and the U.S. will persist.

]]>SINCE cash was invented in the seventh century BC, it has generally been the most convenient way to pay for everyday purchases. But as electronic payments get easier—most recently with the launch of a “contactless payment” system by Apple—economists are beginning to ask whether notes and coins have had their day. Kenneth Rogoff, of Harvard University, reckons they have. Scrapping physical currency, he argues, would help governments to collect more tax, fight crime and develop better monetary policy.

On the surface, Mr Rogoff’s plan seems like a minor change. Notes and coins make up only a tiny part of the money in circulation: just 3% in Britain, for instance. (In America, the proportion is 10%, partly because foreigners hold lots of dollar notes.) The rest is simply records of balances in accounts, either at a bank (in the case of businesses and individuals) or at the central bank (in the case of banks). It tends to be moved around by electronic transfer, never taking physical form.

Rich countries are becoming ever less dependent on cash, as debit and credit cards, “virtual wallets” and other substitutes grow in popularity. According to the World Bank, they had 83 cash dispensers for every 100,000 adults in 2008; by 2012 they had only 68. A paper from the Federal Reserve Bank of San Francisco shows that, in America, the share of transactions using cash has fallen in recent years. Until the mid-1990s the total value of all bills of $50 or less grew in line with the economy. From 1993 to 2013, however, the American economy grew in real (inflation-adjusted) terms by 65%, but notes of $50 or lower grew by just 19%...

]]>… Despite predictions of a cashless society, the Bureau of Engraving and Printing and the U.S. Mint churn out more currency and coins every year. The average American still uses cash for dozens of transaction each month, despite the wealth of alternatives, from good old plastic to virtual currencies to “point and pay” apps like the upcoming Apple Pay service.

… The location of all these "Benjamins" -- it's mostly in $100 bills -- is a puzzle to economists and currency experts. When asked how much money they kept in their wallet or house, the average U.S. respondent said a little more than $40 in the wallet and $100 in the house, according to a 2013 Tufts University study.

]]>Big changes are afoot at business schools as they juggle the evolving needs of businesses and students while still trying to prove that the investment in a costly degree will pay off. These needs are driving innovation at business schools, which are transforming what it means to get an MBA…

…Experiential learning and entrepreneurship are closely tied with students’ growing interest in how businesses can have a positive effect. Bhaskar Chakravorti, dean of the master of international business program at The Fletcher School at Tufts University, said these are important changes to MBA programs, which he said had become over-reliant on case studies and quantitative models. He said schools need to create ethical managers who understand the nuances of businesses that surround them…

Students entering now are interested in the effect business has on society and the role it may play in the public sector, he said. “These are very notable and highly desirable changes in the business school curriculum,” Chakravorti said…

]]>Rockets fired. Retaliation ensues. A shaky peace follows and we are back at another round of negotiations in the stop-and-start cycle of ceasefire in the Israel-Gaza confrontation. As talk turns back to how to re-start the broken peace process, even as Israel claims fresh territory in the West Bank, let us consider something radically different.

Political and military solutions have failed. Given the distance in objectives and motivations on both sides, even in a region with a reputation for miracles, there is unlikely to be a real solution brought about by political or military forces. At best they broker a temporary hiatus before the next crisis begins. My proposal: hold the peace talks in a different location, and this time with some new actors, entrepreneurs, builders and job creators at the table. Let's move the talks not to Cairo or Oslo or Camp David, but to right where a "shot at peace" -- to borrow a term from the CEO of Cisco, John Chambers, a proponent of economic security as a pathway to real security in the region -- could actually be fired. Let us move to a site such as Rawabi City.

I was in Rawabi City with a group of Boston area academics and innovation experts when the latest crisis began. Three of my students from The Fletcher School at Tufts were already onsite spending the summer working there. After several days of travel in the region meeting with entrepreneurs, technologists and venture capitalists across Israel and now in the West Bank, we met Bashar Masri, an audacious entrepreneur with a quixotic mission: to build a planned city from scratch on a barren hill only 5 miles from Ramallah and 12 miles from Jerusalem. Challenged to get essential supplies through Israeli controlled territory, Masri was in the process of negotiating access to water from Israeli authorities.

Navigating this political puzzle in the region, Masri had bypassed the historians, the generals and the politicians: He was building the exoskeleton of normalcy -- shopping malls, apartments, office suites, Main Street. He seemed no different from his Israeli counterparts. This seemed like a shot at peace.

The role of entrepreneurs like Masri in bringing peace has been ignored, because in response to such deep rooted crises such as those in the Middle East, we have always turned to the usual suspects and usual failed political, diplomatic and military solutions. This may come as a surprise to many readers: more than rockets and tunnels have been crossing these contested borders; real money has made its way past the checkpoints.

]]>Over the last decade, while financial inclusion has been an important theme for the government and the regulator, the initiatives that have been taken have been mostly on the supply side. They have aimed at getting the banks to do more. The attempts have been akin to pushing a rope out harder: the banks have seen "inclusion" as an obligation and done what is required to comply. The results have been less than satisfactory. Even in 2014 more than half of Indian households continue to stay outside the ambit of formal finance.

...Is there something more game-changing possible? I believe there is. Today, the combination of universal and ubiquitous connectivity, enormous computing power, unlimited and cheap storage, and instant information, together with Aadhaar, offers a new paradigm. What is needed is a move towards abolishing cash.

…Abolishing cash would perforce bring about 100 per cent inclusion, make tax evasion very difficult, and reduce the massive transaction costs. There is a recent study by Bhaskar Chakravorti and Benjamin Mazzotta of the Fletcher School that assesses the cost of cash in the United States - printing, transporting, counting, safe keeping and destroying notes and coins - at $200 billion. Worse, the cost of cash is higher for the poor than the rich. All the functions that cash performs can be performed digitally via a cellphone or a card, economically and painlessly.

]]>If there is anything recent years should have taught us, it is this: be wary of investment bankers bearing gifts. One of the most durable of such offerings — thanks to Goldman Sachs — is a seemingly harmless acronym: BRIC. This was shorthand for grouping the four largest (in GDP terms) emerging market countries, Brazil, Russia, India, China, when grouping countries as “rich” and “poor” was beginning to appear vaguely antediluvian. Thus far, as boring economic memes go, the acronym has been rather sticky but harmless.

It has generated a cottage industry of pundits coining alternative acronyms. The BRICs themselves felt a sense of international kinship, added an “S”, an actual country (South Africa), conducted summits, postured and issued lofty communiqués. Up till now, it was all cheap talk; but the northeastern Brazilian city of Fortaleza changed all that. Now the BRICS have actually put some real mortar between them: they’ve committed real money to become “equal” partners in a New Development Bank. Now, that decade-old investment banking make-believe product carries a real cost. This is worrisome because there are several faultlines running through.